Capitalism, Consumerism, and the Path to a Better Future

Is capitalism the origin of all the wrong things, after all? Are we moving towards a tyranny where the ultra-billionaires ride the rest of the world on shiny coaches encased with avocados and uramaki? Are the Jeffs and the Elons the only creators and keepers of inequality? If you had the magic wand and could eradicate the word “capitalism” from human history, would we live in a peaceful world full of joy, tea and flowers?

Yes, I will be slightly “opinionated” in the following lines: yes, I would like to share some thoughts, but I intend to create positive discussions and share points of view. I do not want to impose ideas but create pacific dialogue, being open to shifting my perspective radically!

It’s common to point out capitalist practices as the origin of all the practices that make us buy more than we need, exploit poorer countries, and spiral into a climate crisis and destruction of civil rights. It’s worth arguing that it’s not “capitalism” itself that is dragging down society, but a high range of political and economic practices such as Consumerism, lack of social responsibility, lousy management and wrong incentive architecture. And you know what? Whenever we fail to identify them and use the large umbrella of “capitalism”, we fail to get closer to solutions.

Exploring Misconceptions: Capitalism, Consumerism, and the Path to a Better Future

The word “capitalism” originated from the Latin word “capitalism,” which is derived from “caput,” meaning “head” or “principal.” The term “capitalism” was not commonly used until the mid-19th century, but its roots can be traced back to the emergence of capitalist economic systems during the early modern period.

During the medieval period, the dominant economic system in Europe was feudalism, characterised by land ownership and labour by hereditary nobility. However, a new financial order began to develop with the rise of trade and commerce in the late Middle Ages. This new system was based on capital accumulation through investment and private ownership of the means of production.

The meaning of capitalism has evolved over the centuries, reflecting changing economic and social contexts. In its earliest usage, “capitalism” referred to the system of private ownership and investment in which individuals or capitalists sought to maximise their profits.

Throughout the 18th and 19th centuries, capitalism became more closely associated with industrialisation and large-scale manufacturing and production growth. The Industrial Revolution, which began in the late 18th century, saw the rise of capitalist modes of production on a much larger scale, with factories, machinery, and wage labour becoming prominent features of the economic landscape.

Capitalism helped people “believe in the future“: it has let investors and entrepreneurs have loans to pursue their future adventures and projects that would return wealth and opportunities for society. For instance, thanks to the trust of the Catholic Monarchs of Spain, Queen Isabella I of Castile and King Ferdinand II of Aragon, Cristoforo Colombo could afford the equipment to discover America and inspire a new world order. And it rehappens every day: all the great projects and companies that shaped science and technology are enabled by loans and capital accumulation by entrepreneurs and solo artists; we would have never had any Steve Jobs, Thomas Edison, Henry Ford, or Wright Brothers.

Differentiating Capitalism and Consumerism

Of course, for every Steve Jobs and Henry Ford, a Ferrari is driving by streets full of homeless and a worker exploited 18 hours a day. Is that a consequence of capitalism? Or there’s something underneath?

Repeat with me: capitalism and Consumerism are two different topics.

Capitalism values the accumulation of wealth and the pursuit of profit, while Consumerism values the acquisition of goods and services for their own sake. Also, Capitalism emphasises the production of goods and services, while Consumerism emphasises the consumption of goods and services.

Capitalism and Consumerism are often confused or used interchangeably, but they are different. Capitalism is an economic system that promotes private ownership of resources, free markets, and competition. At the same time, Consumerism is a social phenomenon that encourages people to buy more goods and services for their own sake, regardless of their needs or consequences.

Capitalism and Consumerism are not necessarily compatible or mutually reinforcing. For example, capitalism can also undermine Consumerism by creating inequality and poverty that limit access to goods and services, exposing the negative externalities and costs of consumption, and creating alternative values and lifestyles that challenge Consumerism. Consumerism can also undermine capitalism by reducing the quality and diversity of goods and services, eroding the incentives and rewards for productive work, and creating social and environmental problems requiring regulation and intervention.

In this case, my question would be: why do we need to consume more than we need? Why companies that push Consumerism can create a bad practices in consumers without any rule or regulation related to the environment, for instance?

Examining California: A Case Study

Let’s take the most democratic country in the US: California is one of the world’s wealthiest areas, gave birth to multiple trillion dollars companies, and is regarded as one of the most innovative areas in the world. Politically it has been a democratic state since 1988, but despite that, you can find:

Income Inequality: California has one of the highest levels of income inequality in the United States.
Housing Affordability Crisis: California faces a severe housing affordability crisis, particularly in metropolitan areas like San Francisco, Los Angeles, and San Diego. The demand for housing exceeds the supply, leading to skyrocketing rents and home prices.
High Rent Burden: The high cost of renting in California places a heavy financial burden on residents. Many renters, including families and individuals, spend much of their income on rent, leaving little room for savings or other essential expenses.
Homelessness: California also grapples with a significant homelessness problem. The high housing costs, inadequate social safety nets, and limited affordable housing options have contributed to a growing homeless population.
Displacement and Gentrification: Rising housing costs and redevelopment projects in some areas have displaced lower-income communities and people of colour.
Lack of Housing Supply: Insufficient housing supply is a fundamental driver of California’s housing problems. The state has struggled to keep up with the demand for housing, leading to a shortage of affordable units.

You would expect this situation in Republican settings since you expect them to tend to embrace principles associated with capitalism more strongly than Democrats: Republicans often advocate for limited government intervention in the economy, lower taxes, reduced regulation, and free-market principles. They generally support policies that promote business growth, entrepreneurship, and individual economic freedom.

The Role of Incentives in Shaping Behavior

There are good and bad humans, more or less responsible and greedy. Both categories can have an excellent entrepreneurial idea, execute it and scale it worldwide while gathering incredible wealth. And the consequences of big companies and wealthy individuals have more significant effects. Leonardo Del Vecchio, the founder and chairman of Luxottica, an Italian eyewear company, was an optimistic entrepreneur: in 2015 pledged to donate €10 million to the city of Milan for the restoration of historic sites to support the preservation of cultural heritage and contribute to the city’s development, and did the same to each one of his employees, giving them bonuses that compounded to a similar amount.

And how do you fight evil humans? With regulations. Institutions should become more decisive in preventing irresponsible behaviour. Everyone wants to win the same game. For instance, if a multinational knows that it can avoid expenses by paying taxes in a specific country, it will try to do it to “advance” more in the game; there is no incentive for a company to pay extra taxes. That’s why you need to create better rules for the “game”, in which, for instance, the country where you spend the taxes depends on the geographical source of your revenues. And who creates the rules of the games? Institutions.

It’s impossible to “remove” capitalism from planet Earth with a revolution. This system evolved for more than 500 years through regimes, states and countries and designing an alternative is not a hackathon. But higher-order organisations can create a better set of rules so that there are penalisations for malpractices such as human exploitations, climate damages and negative externalities.

Navigating Towards a Better Future

I shared my point of view on the misconceptions surrounding capitalism and its association with harmful practices such as Consumerism, inequality, and social problems. Capitalism is not solely responsible for these issues but rather a range of political and economic practices operating within capitalist systems.

You have read about the difference between capitalism and Consumerism, the example of California, a Democratic state with significant inequality and housing problems, to challenge the notion that these issues are exclusive to Republican settings that lean towards capitalism. Incentives and regulations can be crucial in addressing irresponsible behaviour and creating a more equitable society.